Rising inflation may threaten the market’s largest stocks, but it does have some potential beneficiaries. The Horizon Kinetics Inflation Beneficiaries ETF (INFL), which launched in January, identifies and groups those names to offer investors protection in inflationary environments, its co-portfolio manager James Davolos told CNBC’s “ETF Edge” this week.

“The first thing we want to do is … identify an end market that we believe is inflationary, which we broadly refer to as hard assets, so, a tangible, finite asset that can benefit from pricing pressures,” Davolos said in a Monday interview.

Then, his team looks for companies with “capital-light” business models — those that don’t take on a great deal of risk or spend excessively in order to turn a profit — and reasonable valuations. The result thus far has been promising. INFL is up nearly 18% since its launch and has accrued over $624 million in net assets under management.

“Two areas that you’d be pretty hard pressed to argue against being inflationary over the past decade are higher education and health care,” hence INFL’s top holding, pharmaceutical service provider Charles River Laboratories, said Davolos, also a vice president at Horizon Kinetics.

Charles River helps expedite the early stages of new drug development more cost-effectively than most other organizations, which could lead mega-cap biotech and pharmaceutical companies to its business when pricing pressures rise, he said.